Sam Bankman-Fried directed to executives to hide $8 billion in liabilities

Hiding liabilities under fake accounts

Given the scale of FTX's business presence, the reluctance of Binance, the world's largest crypto exchange, to help it safeguard the business, and the former's sudden collapse in a matter of days has raised doubts about where the investor money went.

On November 11, SBF filed for Chapter 11 bankruptcy protection for FTX and 130 of its affiliated companies following its liquidity crunch. However, prior to this, FTX appeared to be in good financial health, and the liquidity crunch should not have led to the business's fall.

Investigators have now alleged that SBF himself directed FTX executives to move Alamdea's $8 billion in liabilities to an unknown customer account on the crypto exchange's system. This was a subaccount of Alameda but did not have an email identifier. SBF referred to this account as the "weird Korean account" or "our Korean friend's account," and notes tied to this account have been labeled "FTX fiat old," Business Insider said in its report.

The prosecutors allege that this enabled Alameda to hide its negative balance on FTX, and the account had the same privileges as those of Alameda accounts, including exemption from liquidation characteristics. Earlier this month, Bloomberg also reported that FTX's former engineering director had created a code that would conceal Alameda's ballooning liabilities on the exchange.

Former executives reveal the truth

The charges of conspiracy to commit wire fraud and money laundering could see former CEO of FTX, Caroline Ellison, serve up to 110 years in prison while Gary Wang, co-founder of FTX, would need to serve at least 50 years in prison. Both the former executives are now cooperating with the federal authorities in a bid to reduce their sentences.

News that these SBF's former teammates had now turned on him was kept secret to ensure that SBF, who was arrested in the Bahamas, would not fight his extradition to the U.S. Prior to its collapse, FTX was valued at over $32 billion, and SBF, the altruistic billionaire who had spent money saving other crypto companies, had promised that not only would his company sail through the difficulties, but the crypto winter had likely passed.

Now, with $100,000 in his account, SBF has been released on a $250 million bail. If proven guilty, SBF could face 115 years in prison, a Time report said.